🇯🇵Japan is about to invest $2.3 trillion in artificial intelligence, chips, and its own economy.

Prime Minister Sanae Takaichi unveiled a roadmap on Wednesday that covers spending of over 370 trillion yen through March 2041.

Of that, 101.6 trillion yen is for AI and semiconductors alone.

The government has yet to explain how to pay for it without adding to Japan's already heavy debt burden.

There is no breakdown of public versus private money, nor a clear indication of how much of it is new spending.

With no clear source of funding disclosed and debt already at extreme levels, the most realistic path is more government bond issuance, which the Bank of Japan may ultimately absorb, or relying on inflation to shrink the debt burden over time rather than paying it off directly.

Either path relies on the central bank stepping in at some point to keep borrowing costs manageable, which functionally resembles money creation, even if not labeled as such initially.

Economists are skeptical.

Nomura's Takahide Kiuchi called the growth assumptions "fantastical" as the plan, in the best-case scenario, expects potential growth to rise from 0.4% to 1.8%.

Specifically for AI and chips, most of the 101.6 trillion yen is for semiconductors and vertical AI. The plan expects this to generate 443 trillion yen in economic impact from chips and 222 trillion yen from vertical AI by fiscal 2040.

The market's reaction to the news was largely flat, as the 14-year timeframe makes any near-term impact difficult to gauge.

But Sanae Takaichi's investment push has helped the Nikkei briefly top 70,000 for the first time this month, even as fiscal sustainability concerns pushed Japan's ultra-long-term bond yields to multi-decade highs.